International Policy Update

1
International Policy Update Producer
Opportunities

• Parr Rosson
• Professor Director
• Center for North American Studies
• Department of Agricultural Economics
• Texas AM University

2
Overview

• Trade Trends
• International Institutions
• Trade Agreements
• Conclusions Implications

3
Trade Trends International Setting
4
Billions
8
7,570
ME
AFR
LA
TOTAL
NA
WE
I. ASIA
EE/FSU
D. ASIA
8
6,310
Ind. 8, Dev. 31
6
6
4
4
2
2
0
0
1990
2000
2001
F2005
F2010
F2015
F2020
5
GDP, Trillion 1997 Dollars
Ind. 64, Developing 140
6
U.S. Tariffs, 1789-2004
Percent
70
70
Tariff of Abominations, 1828
Smoot-Hawley Tariff, 1930
60
60
Morrill Act, 1861
50
50
Generalized System of Preferences, 1968
40
40
30
30
WTO, 1995
20
20
Fordney-McCumber Tariff, 1922
10
10
GATT, 1947
0
0
1789
1816
1820
1840
1860
1880
1900
1920
1940
1960
1980
2000
Statistical Abstract of the United States
7
World Average Agricultural Tariffs, 2002
Percent
140
Region Average
115
World Average
120
85
100
62
80
55
60
40
30
25
40
10
20
0
Asia
United States
South America
North America
European Union
Central America
Caribbean Islands
Source WTO ERS/USDA
8
Top 10 U.S. Ag Export Markets
9
Trade Surplus Vanishes
Since 2000 Exports 25 Imports 50
10
Observations

• Disparity in Population Income Growth
• Disparity in Use of Trade Barriers
• Disparity in Agricultural Trade Growth
• Finally Seeing China Emerge as Market, Cuba
  Growing
• Questions About Role Future Importance of Trade

11
International Institutions Trade Strategies
12
U.S. Trade Strategy

• Unilateral
• Generalized System of Preferences (GSP)
• CBI/CBERA
• African Growth Opportunities Act (AGOA)
• Regional/Bilateral
• NAFTA, CAFTA-DR, Others
• Multilateral
• World Trade Organization
• Only Forum Where All 150 Member Countries Are
  Present Farm Policy Is Negotiated

Concurrent Initiatives
13
Doha Development Agenda in the World Trade
Organization (2001-6?)
The Hong Kong Ministerial December 13-18, 2005
Agreement on Reductions by April 30, 2006 Draft
Schedules Due July 31, 2006 Conclude Negotiations
December 31, 2006
14
Three Pillars for Negotiations in Agriculture

• Market Access
• Export Competition
• Domestic Support
• Negotiations Under Tight Timeline Due to
  Expiration of TPA July 2007

15
Hong Kong, December 2005

• Little Progress Made in Hong Kong
• EU Trade Commissioner said state of negotiations
  was serious but not desperate.
• Agreement to Eliminate Export Subsidies by 2013
• Greater Quota-Free, Duty-Free Access Granted
  LDCs, Up to 97 of Products
• LDCs want it above 99 and Prepared to Veto
• While Many Fundamental Issues Remain Unresolved,
  Deadlines Have Been Set

16
Hong Kong, December 2005(continued)

• Agreement on Degree of Tariff Cuts by April 30,
  2006
• EU Wants to Reduce by 39 (They Claim 46) while
  U.S. and Others Think EU Needs to Reduce by about
  60
• Each Country to Submit Tariff Schedules by July
  30
• While Export Subsidies Addressed, More work on
  STEs and Export Credit Guarantees Needed
• Agreement Still Needed on Cuts in Trade
  Distorting Domestic Support (Amber/Blue)
• U.S. Wants about 53, Pushing EU and Japan
  Towards 80
• This Does Not Address Green Box Programs
• U.S. wants New Blue Box for CCPs

17
Other Negotiating/Related Issues

• NAMA (Non-Ag Market Access)
• The Cotton Case (DS 267)
• U.S. Budget Situation
• Dissension within EU (France vs. Everyone Else)

18
Observations

• WTO Could Result in No Substantial Agreement
• Future of WTO May Be On the Line
• Agreement Important to U.S.
• Open Markets
• Get Rid of Export Subsidy Distortions
• Minimize Litigation Over Farm Policy

19
Role of Trade Agreements
20
Why Regional Agreements?

• 2d Best After MTN
• WTO Has Been Slower than Desired
• Outcome is Uncertain
• Economic Incentives
• Open Markets
• Increase Business Efficiency
• Keep Pressure on MTN to Perform

21
Strategic Considerations

• Secure Strategic Materials
• Oil, Fertilizer, Natural Gas
• Stem Illegal Immigration by Creating Economic
  Opportunity in Other Countries
• Create Buffer Zone Against Terrorism (9/11
  Commission Report)

22
CUSTA, 89
Bahrain 05
Jordan 01
CAFTA-DR 05
NAFTA 94
Israel 85
Morocco 04
Thailand 06
Panama 06
S. Korea
MEFTA 06
Andean FTA 06
FTAA 06
Singapore 03
Chile 04
Australia 05
Southern African Customs Union 06
U.S. Trade Agreements
23
Trade Agreements In-Place (7)

• Israel-1985-1994
• Canada-US (CUSTA)-1989-1998
• North America (NAFTA)-1994-2008
• US-Mexico
• US-Canada
• Canada-Mexico

• Jordan-December 17, 2001-2010
• Chile-January 1, 2004-2015
• Singapore-May 6 2003-2012
• Australia-January 1, 2005-2022

24
Trade Agreements-Pending (10)

• Morocco-President Signed 8/17/04, Pending
  Signature, King of Morocco
• CAFTA-DR-Signed by President, (20 Years to Full
  Implementation)
• Bahrain-Pending Submission to Congress

• Panama-Nine Negotiating Sessions Held, Panama
  Delays
• Colombia, Ecuador, Peru (ANDEAN)-Nine Rounds,
  Negotiations Continue
• Thailand-Three Rounds Held
• S. Korea - 2007

25
Trade Agreements-Pending (10)

• Southern African Customs Union (SACU) Botswana,
  Namibia, Lesotho, Swaziland, South Africa-Six
  Rounds Held
• MEFTA Oman United Arab Emirates
• Under Negotiation Egypt, Others??

26
Mexico
Houston, 1,300 Miles NW
Dominican Republic, 800 Miles NE
North
27
CAFTA-DR Demographic Overview
28
CAFTA-DR Prospects

• U.S. Ag. Export Gains of 1.5 Billion Annually
• Near Term HQ Beef, Cotton, Wheat Soybeans
• Long Term Rice, Dairy, Pork, Poultry Corn
• Challenges Sugar, Cantaloupe, Honeydew
• Limitations Infrastructure, Income
  Growth/Distribution, Plant Animal Health
• Other Opportunities Investment

29
CAFTA-DR Ag. Trade, 2003
US Exports 1,339 million
US Imports 2,654 million
Meats
Sugar
Coffee
15.2
7.1
Other
Veg/Fruit
17.3
Oilseeds
12.4
8.7
19.4
Cotton
3.5
Other
Fish
9.6
18.0
Bananas
25.4
Fruit/Veg
Grains Feeds
19.9
43.5
USDA, FATUS.
30
Observations

• Agreements May Be Necessary Condition for Opening
  New Markets for Agriculture
• Time is Crucial Due to Expiration of TPA
• Some Agreements Easier than Others
• Future of Free Trade of the Americas in Serious
  Doubt

31
Conclusions and Implications
32
Conclusions Implications

• U.S. Market Is Open, Rest of World Is Not
• U.S. Export Growth Lags Import Growth
• If Trade Growth is Important, Disparities Must Be
  Addressed
• Progress in WTO Important to U.S. Texas for at
  Least 2 Reasons
• Markets
• Farm Policy

33
Conclusions Implications

• Reductions in Trade Distorting Domestic Support
  Likely Substantial
• Some Adjustment for U.S. Producers
• Absent WTO Progress, Expect More Litigation in
  WTO Aimed at Farm U.S. Policy
• Trade Reform is at a Crossroads Protection or
  Progress?
• If Export Markets Are Important, Trade Agreements
  WTO Progress Are Necessary, But Not Sufficient

34
Thank You!
Questions?
Parr Rosson Department of Agricultural
Economics Texas AM University College Station,
TX 77843-2124 E-mail prosson_at_tamu.edu Telephone
979-845-3070